Sustainable

Banking

“For an ADI to be sustainable, it must take into account the social and environmental impacts of its investments and loans ”.

Gen Advisory Pty Ltd,

September 2019.

The term “Sustainable Banking” refers to banking practices that integrate “environmental, social and governance” (ESG) criteria. It prioritizes ESG benefits as a key objective.

Unlike “traditional/conventional” banking, which is based on a two-dimensional risk and return analysis, Sustainable Banking considers three dimensions: risk, return and impacts.

Gen Advisory’s prediction is that the future, ADIs will no longer differentiate between “traditional” and “sustainable banking”. When the science on Sustainable Banking has progressed sufficiently, there will only be one form of banking – Sustainable Banking.

At a Glance

Common sustainable banking strategies

Sustainable Lending

Microfinance

Green Bonds

Impact Investing

Sustainable Funds

Our Analysis

Sustainable Banking

What Is It

Banking which integrates “environmental, social and governance” (ESG) criteria and prioritises ESG benefits as a key objective
Traditional” banking is based on a two-dimensional risk and return analysis. With sustainable banking, three dimensions are considered: risk, return and impacts.

The Future

Gen Advisory’s view is that there will eventually no longer be a distinction between “traditional” and “sustainable banking”. By definition, all banking will need to be sustainable.

Climate risk will no longer be viewed as a merely moral/ethical issue, but also a financial one.

Key Issues

Current issues in Sustainable Banking:

Lack of of universally-accepted metrics for measuring ESG benefits.
Lack of certainty regarding how to incorporate ESG criteria into credit lending decisions.
Competing priorities
Inadequate budgets.

Opportunities

New/increased pool of investors
Improved brand Value
Improved regulatory engagement
Reduced costs
New Products/ Services
New Client Segments
New Geographic Markets
Employee Retention

Threats

Gen Advisory’s view is that ADIs which do not eventually adopt sustainable banking practice will face an existential threat.

How we can help ADIs incorporate ESG criteria

Provide strategic advice to ADIs on the latest development and insights on Sustainable Banking - including how ADIs can incorporate ESG criteria into their credit lending decisions.
Deliver bespoke research on a specific Sustainable Banking or ESG-related area of interest.
Deliver bespoke training on Sustainable Banking and ESG, tailored to the ADI's needs.
Manage and executing, on an ADI’s behalf, a project to incorporate Sustainable Banking and ESG.
Conducting due diligence on prospective solutions providers.